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Ukraine 40, Us 28, Russia 22, U.s. 17, China 16, Europe 14, S&p 10, Crimea 10, Sam Zell 9, Sam 9, St. Louis 9, Brazil 9, Jim 9, Becky 7, Jim Bullard 7, Forte 5, Venezuela 5, Viktor Yanukovych 5, Pepsi 5, Janet Yellen 5,
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  CNBC    Squawk Box    Business news and talk as the  
   trading day unfolds on Wall Street.  

    February 28, 2014
    6:00 - 9:01am EST  

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2014. "squawk box" begins right now. good mortganingmorning, eve. i'm becky quick along with joe kernen and andrew ross sorkin on "squawk box." we have big lineup of squawk newsmakers and masters today. later today, wilbur ross takes the ceo call. then at 7:00 a.m. eastern, st. louis fed president james bullard will join us as a guest host. at 8:00 a.m., an exclusive interview with sam zell, and mark mow buus will join us live from rio this morning. we'll get his view on the situation in ukraine .other hot spots. we start this morning with the rising tensions in ukraine. the country's central bank governor reassuring markets that it does have enough reserves to pay off critters. the prime minister says it hopes to get international financial aid in the near future to stabilize the government. meanwhile, ukraine's acting
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government calling for a execute session. armed men have now seized two airports after taking a parliament building hours earlier. russia denies its forces were involved. the region is home to russia's black sea fleet. jim maceda is in moscow. jim, there have been a lot of stories circulating around about whether or not russia was involved. >> that's right. russia does deny it, as you say. but it didn't have to be their military. because it was dozens of russian-speaking gunmen who stormed those two airports today. the main airport in crimea's capital as well as a smaller military airport. now, it looks like a repeat of yesterday's incident, when those armed commandos seized crimea's government buildings. again, they were not russian,
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per se. they were ethnic russians living crimea in ukraine. at the commercial airport today, eyewitnesss said the gunmen were looking for ukrainian guards, but where they couldn't find any, they simply left. however, a few vigilantes were left behind patrolling the airport perimeter, which they're doing at this hour, but not disrupting flights. meanwhile, at the balbec military airport, it's really a standoff and that's continuing with russian-speaking gunmen outside the terminal, ukrainian military inside. the government in kiev has called two emergency sessions. one amongst their own security people and one at the u.n. security council to try to deal with this matter. now, becky, there's another source of tension because russia is harboring the ukraine's fugitive ex president viktor yanukovy yanukovych. who has been charged with mass murder. he is now in russia.
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in fact, he's going to be speaking at a press conference in less than a couple of hours, and clearly he is no under pressure protection. and that also, if you will, embarrasses the government in kiev. back to you. >> jim, it sure seems like putin is sending out some mixed signals. what do you make of that? >> true. it's a confusing and often contradictory situation with vladimir putin. on the one hand, you see the ratcheting up of tensions in an area that he's so influential in. the provocations in crimea, the war games going on. it's something out of an old soe soviet play book. but then you hear from the other putin, sounding quite consill story ordering his government to cooperate with the foreign and ukrainian partners, who develop
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trade and market relations. that's been the problem for the west. i've heard it many times from the former ambassador here. he would say that there are, in fact, two putins, the cold warrior, the modern statesman. you just never know which one would show up. hopefully for ukraine, ultimately it will be the latter. but that's not a given. becky. >> jim, thank you very much. again, jim maceda joining us from moscow. as he mentioned, victor yanukovych is expected to speak later this morning. he's claiming that he is still the country's legitimate head of state even though he's not there any more. we'll have more on this with where william taylor in a few moments. >> is he at an undisclosed location? do we know who he is? i would go to russia. >> he's in russia. i don't know where. >> that is going to be a
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struggle. >> he woulve public zoo probably at this point. so he's either going to come back as a legitimate leader or be on trial for mass murder. >> and we need to be cooperating with the europeans and american and ukrainian leaders or he's harboring the guy who they're calling a mass murderer. >> hopefully it's not 1960 or whenever that was where they decided we're going to take this into our own hands. that would be the black swan. the s&p 500, finally -- and we've been saying, you know, just as long as it's by february. january and february so goes the market. >> get a gain of four points for the year. >> one thing we can do, though, forever, we will know the 2014 can be based off of 1850 on the s&p. so we're either above for the year or below.
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i don't think -- i'm not that disheartened by this because we had a huge gain in 2013. that 5.8% pullback that we saw, people were like, i'm looking for 10, i'm waiting. i'm looking for 10. should we? now we're doing four, then we're going down eight. >> i know is i was so mad, i didn't -- >> so did anyone get a 6% discount on these stocks? >> you're such an optimist. i love it. >> well, we weren't expecting it because the futures are down. it's now positive. made it before match. stocks rising as the fed chair janet yellen blamed the weather for some of the economic weakness. the dow added nearly 75 point is and the nasdaq closed at a 14-year high, adding about 27 points to close at 4318.
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and the futures right now this morning, we'll take a quick look. now, today, between your apartment, your incredible apartment and your incredible, like, stretch limo, whatever it is that you're in now, did you feel the chill in the air this morning? >> oh, yeah. >> ten years -- i mean, it was 10 degrees. b but 49 out of like 50 states are freezing. so i have some data. i have a chart now that explains a lot of how this works. >> i should have known. >> if you read this on the left, there's some cooling there. that is just whether you idiot denier. then there was some warmer. that's climate change. then it went down a little and
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that's just whether you idiot denier. and then it goes back up which is attributed to climate change. then it goes down and it cools a little which is just weather you idiot denier. then it goes up and that's climate change. andrew, you posited the west of the world could be warm and it could be cold here. there's another side that schans this vor tess is what we can pekt. >> identify heard that, too? >> is it the weather, is it -- >> i'm not a scientist, though. >> the answer is c, it's both. >> you think it's both? >> yes. it's weather and it's caused --
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and the polar vortex is caused by -- >> there are people who are much smarter than i am who i know you disagree with that we have climate change and the trend line suggests, i thought -- >> but not for 17 years. even your paper has written about the -- >> right. on a yearly basis -- >> no, for 17 years, there's been no average rise in global terms. but there are a lot of ways to sdmran th explain that. there's deep sea heating, no one postulates that maybe we overstated the sensitivity to 1 part and 10,000 parts co2. >> for me, this is a losing argument because i am not -- >> for me it is because you know how long it's going to take before anything is he are solved? at least five years. and right now, you've got everything going your way. it's climate change. every single thing that happens
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is due to this. i'm going to be called an anti-science denier for five years. >> well within well, i think the democratic is accurate. >> it's funny, the twitter accounts, they call me all these names and the next one is idiot gop, these bastards. then they go on and talk about isa is next, then they say something about michelle o'donnell or whatever. every single one, they're all the same people. it's so weird. >> this is a longer conversation and we have to get to some news. but it's actually interesting because i don't know why it was bam politically divisive issue. but it does feel like it's come down from a political decide as
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opposed to -- >> the huff post readers know a lot about invoking scientist, but they have a low level of -- it's frightening. i go it's just golfing 0.2% and atmospheric at p 3%. >> i never joined rocks for jocks. >> geology class. >> let's talk about some corporate news this morning. >> if it goes down -- >> do you want to show it again? >> maybe you worked for -- who is now a big climate guy.
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>> we do have some corporate news. pepsi is not splitting up. is it coke or pepsi? >> i saw it just down the line. >> well, you know, there's others. the beverage and snack food giant has now officially rejected the latest proposal from activist investor, nelson peltz. the board saying it's now in complete alignment rejecting his proposal. he sent a letter last week urging the company to spin off beverages and focus on salty snacks. makes it easier to say talk to the hand when your stock is trading where it is. he has toukd folks that he is not trying to professionals
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will -- >> i have seen some other shareholders here in support of pepsi. >> i think right now, arguably, from what i want, i talked to some people yesterday who were involved in this that the math would suggest that nelson is on the losing side in this situation. >> i like nelson, but you know me. >> you think the synergy is wild. >> i like anything that ends in tos. if i reached for the free tfrits and reach for a pepsi, fritos, doritos, everything ends in t-o-s. fritos, tostillos. those aren't the same, though. >> the problem is it's a
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counterfactall argument. >> it's an uphill battle. >> do you get more shelf space if you have drinks there or -- >> in certain parts of the world, you do. what nelson has argued repeatedly is there are certain parts of the world where pepsi has effectively created licensing and deals with others such that the stuff doesn't go on the same truk today. they have more information. anyway, we were fog to talk about clowing, be -- arm blen have ceased two airports in
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crimea. russia is denying involvement. mr. ambassador, thank you for being here today. >> thank you. >> putin is sending out mixed signals about this. do you think russia is involved with what's been happening in crimea right now? >> russia can't help be involved one way or the other. but the signal we've gotten from mr. putin today is a part of one. he's instructing his government to interact with the new government and the interactive communicate as they put together a package that will do what ukraine needs to do? >> at the same time, identifying president -- >> i think that tells us nothing. viktor yanukovych has been
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impeached. >> he's wanted by current leaders in ukraine as a mass murder and putin is sheltering him. >> he is apparently in russia, that the. the important thing, though, is to get things stabilized. >> so this is something that you think ultimately we should let pass, don't worry about what yanukovych is doing, worry about the future of the country? >> absolutely. absolutely. yanukovych is the past. he is history. what his future is this new government that's establishing itself in kiev. that is something that could be serious and the new government needs to be careful about that. we need to be careful about that. but they need to keep their eye on the ball of how to serve the people, awl people of russia,
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both east and west. >> mr. ambassador, that certainly sounds like the calm, cool and collected way of going about things. but you can understand how now that blood has been shed, now that there are people taking over buildings the, taking over airports in crimerai. you can understand how looking at it on paper is one thing. they they get it is another. >> you are absolutely right. there was blood spilled in the change to the runnup of the new government. but with the new government, as far as i can tell there's been no spillouts. these takeovers are probably
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independent. they've had a difficult time with russians and pro russians. you're right about the economic are 230r78 of government. >> what did the best case scenario sdmp. >> the new government reform, today's incidencation from mr. putin is that he would be a part of that economic package. over the next six months, that can then stabilize the government. the government can establish itself, provide services to the people of ukraine all over, that is the people who voted for mr. yanukovych and people who voted with his party. they need to be part of the solution, as well. and they will be part of the government. but that is what the next six months ought to look like.
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>> mr. ambassador, thank you very much for your time today. >> thank you. coming up, finding a place for your bitcoins, that's not so easy these days. how about your -- that's next in today's executive edge. before you hit the road, 40% of u.s. workers left paid vacation time unused last year. if they had used those days, it could have been given the economy a $160 billion boost. so how many vacation days did americans not use in 2014? find out, next. (vo) you are a business pro. seeker of the sublime. you can separate runway ridiculousness... from fashion that flies off the shelves. and you...rent from national. because only national lets you choose any car in the aisle... and go. and only national is ranked highest in car rental
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back now with today's traveler's check, how many paid vacation days went unused in the u.s. in 2013? 429 million. >> welcome back. tracking the weather forecast for you, the national forecast, we head to the west coast because we have a pretty potent system that's about to move in, moving in right now bringing in steady rain along the west coast. we need this rain, but it's coming in ram yidly and heavily. that could lead to issues b here for us for the day. across southern california, some
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of those burned areas with the wildfires, wildfires, 3 to 5 inches of rain possible. in the mountains, big time snow. some spots here in the sierra, getting around two feet or more on. when this all marches away into the middle of the country, we'll see snow showers through the plains. as we head into sunday, a bit of a wintry mix and icing concerns will be in place in these spots. the northeast gets in on it, as well. sunday we'll start to notice some of the snow showers. and then on monday, really getting going. pittsburgh, new york, you could be in that sweet spot. there could be some significant accumulation in some of these locations. >> i'm not listening, alex. thank you very much. alex wallace, we'll talk to him again soon. right now, it is time for the executive edge. mt. gox, one the world's largest bitcoin exchange has reportedly filed for bankruptcy protection in tokyo. it has raised questions about the safety of the virtual currency.
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every virtual wallet used to hold bitcoins has a unique number. if you record that on paper, on a thumb drive, it keeps it out of reach for criminals. the currency touted to one day produce cash could be stored money in a safe or under your mattress. this story confuses me even more. there is no such thing as a real bitcoin, right? it's these numbers that come on the virtual wallet? >> that's my understanding of what this is. basically, you have to print it all out and keep your numbers. >> crazy. >> i thought about this recently because i just got a -- one of these things that said they were no longer going to send me statements any more for my account. >> what do you mean, send you paper statements? >> no more paper statements. i can ohm get electronic statements and if i wanted paper statements, i'd have to write them and request paper statements. >> i worry about that, too. >> what if one day the whole
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thing falls apart? >> i'm like a weirdo like you, too. >> what was my coin that we had if we were -- >> oh, the kernen-cy? >> the kernen-cy. i don't understand bitcoin. but one thing i do understand that looks like it's going to be bankrupt is quizno's. this is the one that -- have you been to a quizno's? this is -- i don't understand how you can -- how can you go bankrupt? >> when was the last time you had quizno's? >> i haven't had -- i'm kidding. >> about six months. i love quizno's. >> and it's too much debt, right? >> apparently. that's what happens. >> i leave that up to you. but this i'm going to delve into. >> i'm still stuck on the bitcoin.
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>> am i crazy enough to say this could be the future for everything, though? >> it's all going to be like that. >> but this is where we're going. and the question is bitcoin -- is bitcoin that much worse than all these others? i don't know. ichg it's an early stage thing. >> i will admit, when you start hearing about the idea of a cyber attacker taking down the system, bringing down electric grids, messing with bank accounts, it does make me nervous. >> if your e-mail went down, what would happen? >> i guess i'd get over the e-mail thing. i'd be more concern about my bank account. >> but i feel like so much -- so much of my life is now online.
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i hear you. all those jet setters and executives on the go listen up to this. first class perks have nothing to do with e-mails, drinks or seats. global airlines are increasingly rewarding wealthy flyers with something more intangible. physical distance between them and everyone else. the idea is to try and provide an exclusive experience. inaccessible and ip invisible to those in coach. so privacy. >> i want to know how it works, though. >> do you leave a big, empty space? >> i have tried to use the bathroom in first class before. >> and got kicked out? >> and people like you look at me like i'm going to do something in there. are coach people dirtier or
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smellier than andrew? >> i don't know. i -- >> you come through that curtain and people turn around and it's like -- >> i didn't know that were curtains. >> have you really tried to bust in? >> i don't know what you're talking about. >> you interloper. get back in that line. all right. that's a weird -- the way we phrase that story, i moon, i can understand how someone would -- but the way we phrased it where basically we're saying the people that want to sit there think they're much better than -- >> don't look at me. >> it was the lady from knots landing, the blond lady. she had glasses on in first class. she was like, i wouldn't know you if you were -- i don't care who you are. you're in a prime time soap opera.
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>> when "squawk box" returns, we're going to check out the markets. the s&p 500 turning 306 for the year. how much will be economy corporate? and later in the program, james bullard will be our guest host. we'll get reaction to yellen's testimony. we'll be right back. is built for business. built for your company. your customers. your... sales department built from the ground up. for fast downloads. fast uploads. for a... built for tablets. for laptops. for... this. built for saving money. built for saving time. built for architects. built for... sign up for internet and voice and find out how to get four weeks of internet for free. comcast business. built for business.
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welcome back to "squawk box" this morning. the s&p 500 closing at a record high on thursday following fed chair janet yellen's congressional appearance. richard steinburg, of steinburg global asset management. he's in florida. look at that. it's so -- hold on. >> no, that river is frozen. >> but it's very -- is that a picture behind you there? or is that real? >> no, this is a picture because i don't want joe talking about my yacht in the background again. it's just a picture. >> how many yachts can you ski behind, steinberg? how many do you need? >> thank you, joe. >> also on the fed here, steven rushido. thank you both for being here. are we too high on the s&p? is this going to last? >> i don't think we're too high,
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but i think that investors yesterday took from yellen that it's steady as she goes and let's the data continue to drive their decision. so i think, you know, we're sticking with our 1930 target, but our portfolio managers are starting to take profits as certain stocks start to reach their target. and we're creating a little bit of a cushion for ourselves so that if the data starts to weaken or weather creates opportunities for the us on the short-term for certain companies, we'll be able to do some buying. >> did you get caught out in january? >> no. actually, we put some money to work at the 1750 level with some cash. and now we're just deciding whether or not we have to put a hedge back on for part of the portfolio. or just -- we tend to be target driven, like i said. so as things get close to our targets, we manage greed and take some money off the table on the way up. >> steve, what's your target right now?
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>> we're looking for about a 7% to 10% rise in the s&p 500 for this year. >> and we're already 6% in? >> correct. i think the problem with the market this year is the reality that expectations have gotten ahead of what the economy can actually accomplish. last year was an incredible gain, it was a big multiple expansion. the question is whether you can get additional multiple excha e expansion this year. probably a little bit. but that's still a good year. the problem is we've gotten our expectations too high. >> so if we only have 4% to go, how do you play that, effectively? >> well, it's hard. it's going to be a significant trading range environment. the market will correct back on a repeating basis. we'll get a period where the market doesn't accomplish a heck of a lot. that's all you should expect. >> you watched janet yellen yesterday. did he provide the confidence that you would have wanted? and the reason i ask is because historically, if you just do the math, every time we get a new
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chair in this role, we usually have some form of a correction within six months. and the question that i keep wondering is whether we have that correction or it's still to come. >> i think, you know, investors tend to react to the unexpected, not the expected. and yesterday, the messaging was steady as she goes. so i think for now, we're in good shape. the march meeting, unless data falls off the cliff, investors will expect and will treat another $10 billion in tapering to occur. so i think we hand off from bernanke to yellen in this case may be a little different. because she was pretty much on tune with the dovishness of the fed and there hasn't been a fumble to that football. >> steve, where does the ten-year-end? >> 2014, probably right around where it is right now in the 2.75% area.
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we have a dip down towards 350 to 2.25. and then we reverse back up. the economy just doesn't have the inflation potential. look what happened in europe last use it. does japan get out of inflation? there's no reason for inflation expectations to rise. in fact, the reason for disinflationary pressures continue to share through and pull yields down. >> is there someplace else in which you think is better? >> i wish there was. the economy is doing the exact same thing the u.s. economy is doing. it's underperforming expectations. that's why you're seeing these pockets. it's going to continue to happen throughout the year. there aren't many safe places to go. what you wind up with is getting yourself into areas where you can expect expectations to give you a relatively low return. >> the only thing i would add to
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that is if you end up having some dividend income to your other guests, 4% return, you get to a 6% or 7% total return number from here. so i think as we get closer to kind of an okay year in the market, generation of income from dividends can really add another 50% to the price appreciation there. again, it's not a crazy great year, but certainly a solid year, especially for people spending our endowments, spending 4% to 5% of their principal. >> okay. we'll leave the conversation there. steve and rich, that picture behind you -- i really -- i don't want to hang out there. >> i don't know why everybody is worried about weather. the weather is okay here. >> thank you for coming in. >> the ice boats aren't -- the ice cutters aren't there. >> they are today. that's a fake picture. >> no, they're not. >> do you think "frozen" did as well as it did in the theaters because of the -- >> that came out before.
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>> they were ahead of their time. >> i like the original frozen where the people are stuck in the chair lift. >> oh, i never saw that. did you actually see that? >> yeah. one guy finally gives up -- >> there's a movie called "frozen"? >> they get abandon up there for the weekend and one guy finally takes it in his own hands and jump us, breaks both his legs because he's so high up and then the wolves come. there's like six of them. .it's just -- >> that would be a bad way to go. >> happy that we're inside. >> there's a liam nielsen movie with wolves. >> "the gray." up next, another fall for china's currency. we have a live report from beijing because this is a quick fall. monday, warren buffett will be answering your questions. that starts at 6:00 a.m. eastern time. "squawk box" will be right back.
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welcome back, everybody. we've been watching u.s. account futures today. they are down just slightly after the dow and the s&p 500 closed at a new high yesterday. nasdaq closed at a 14-year high. the futures are down by about 14 points below fair value. s&p is off by 1 points. we saw a weekly loss for china's yuan. let's get to eunice yoon live in beijing. >> hey, twice. china capped off a very tough week for the chinese yuan. today, the yuan actually declined by its biggest drop than we've seen since 2005 and the currency deval ewe onation
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when it pegged against the u.s. dollar. it was down by nearly 1%. most people at this stage believe that the government is really pushing to send a signal to the market ta the yuan will be trading in a wider trading ban. the currency is very highly controlled. right now, it could rise and fall by about 1%. people are saying that we could see an announcement that the trading ban would be widened by 2% sometime next week when china has its own version of the state of the union address. currently people are saying anywhere between march and june. >> eunice, thank you. coming up, finding opportunity in turmoil. wilbur ross tells us where he's looking for investments rights now. and later, "squawk box" exclusive billionaire sam zell
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the economies in the european union are improving. eu gdp had an growing for the past three quarters and transportation might be the next big growth opportunity in the region.
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joining us is wilbur ross, chairman and ceo of w.l. ross and company. just got back from ireland. is that -- like here, wilbur, a lot of times transports lead everything else. is there something you're seeing in that sector that makes you think europe is improving faster than people think? >> i spoke at a conference in hamburg the day before yesterday. and a lot of transportation people there, ocean shipping people, rail transport, all the logistics. they all say that they feel the european economy is getting better. to me, that's a very fundamental kind of currency indicator of the economy. >> plus, interest rates don't act the way they're -- they're not allowed to -- they're not able to raise money at these levels because bond market is pretty savvy and those have been
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much better behaved than a couple of years ago, too, right? it all seems to be indicating things are better. >> soon to be. and then yesterday i was in dublin, of course, we had a bank board meeting and it was very clear that the irish and british economies are getting stronger, as well. as i said, pretty good about europe this trip. >> so is this where you would be focusing right now? because we're also too far down the road in this country, that the opportunities are there now? >> well, i think europe is going through some of the structural readjustment that it needs to make itself more viable. needs more labor market flexibility, the needs a little better control of the fiscal situation in the various countries. so i think there's a lot of
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change at the moment. in terms of the u.s., i share some of the pes nimp of the congressional budget office. i think the structural issue of so many people dropping out of the -- something like 37% age population neither has a job nor is seeking one. that's a very heavy burden to lug along when you're seeking economic growth. >> okay. very good. we do have -- we have sam zell coming on a little bit later. he's talked about the 1%er. i don't want you to say anything about the 1% getting picked on. you're another billionaire. you're going to say something about the people, the have notes sucking it up and working harder and look like a rich fat cat taking a shot at the have nots.
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i'm not going to ask you about that. unless you want to volunteer yourself. i'll move on to something else. there's a guy we had him on. i don't know what you do at that secret meeting you have. i think you know what i'm talking about. apparently you're all dressed up in terrible costumes. you are the steven wright of comedi comedians. you tell a joke and people will be in the aisles no matter what with your dead pan delivery. what goes on at these secret meetings of your fastly 1 percenters. >> it's a misnomer to call it a secret meeting. it's a private organization and it was having a private party. seemingly, what some of the people from outside were complaining about was the theory that this was all people who had been vebailed out by the
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government and now they were making fun. i certainly didn't get bailout money. chris williams, my predecessor as head of the organization who runs one of the larger minority investment firms in the country, he didn't get a bailout. my successors, the harriss, they didn't get a bailout. so i think there's been a little bit of hyperbole introduced into the equation. it is true that there were a couple of hundred members there. it is true they were spoofing each other for a couple of hours. and when you have that kind of environment, unfortunately, some people say some things that they probably wish they hadn't said. >> yes. >> i wonder how many people have never said anything that they'd like to retract. i think very few. >> yes. this guy's sensibilities, kevin, he said it was absolutely awful. i actually -- we don't have the music. i was going to play some "eyes wide shut." i don't know what went on during
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this super secret meeting that you had. there were no masks? there were no people in -- there was no devil worship, was there? >> no, nothing of that sort. clearly nothing of that sort. >> what are you trying to do? he's your buddy, right? yes. >> kevin had work at the time? >> at the time. this music was not -- okay. all right. i'm wrong then. i was trying to think of a joke for you to tell wilbur. his delivery, you've got to admit. >> he's done very well. >> he has. >> i'm giving him a lot of credit right now. >> in terms of this country, wilbur, 3% this year, we had a little weather issue or is there some slowdown? can any of your assets here, can you tell whether there's something more to this than just weather? >> certainly weather was a big factor in the recent period. and that in turn led to some
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other kind of multiplier effects. i do think obamacare and its meaning that people don't need work in order to get health care is going to have a negative influence on the economy. you can't have more and more people making the decision not to work and expect the economy to keep growing. that i think is a very serious structural problem. and frankly, i don't regard it as a legitimate choice for an able-bodied adult to say, you know what, i prefer it not to work. so the rest of you should support me for the rest of my life. i have total sympathy for people who have disabilities for one thing or another. >> right. >> but for someone who is able bodied and just chooses not to work, i don't think that's something that our society should foster. >> it's not -- you know, it's no way to live either. there have been studies done
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about where happiness really comes from. it's not necessarily making a lot of money. it's earning success, feeling good, being up and being productive. i don't think anyone wants to sit home and watch soap operas. >> i think people need a purpose to life, a focus. i think it's sad if they do not. >> i agree. for the record, there was no human sacrifice at that meeting that night that you're aware of? >> no. >> you didn't serve blood, no one was drinking blood? absolutely not. >> we have a rule against vampires. >> let me talk -- will you e-mail your buddy and tell him. he categorically denies human sacrifice. >> i'll let him know. >> will you let him know. >> thank you, wilbur. >> absolutely. "squawk" taking fed matters into its own hands. we have a special guest host, st. louis president james
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bullard is here. we'll talk to him about whether he thinks the weather is to blame for the slowing economy. stick around. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
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welcome to "squawk box." there is a special "squawk" newsmaker guest hosting today, st. louis fed president james bullard. on the agenda, will the economy survive the winter? fed chair janet yellen's vision of monetary policy. and creating jobs in america. crisis in ukraine. an uncertain future for a government in transition. should investors avoid investing in the region right now? all that, plus apple opens up to shareholders. the second hour of "squawk box" begins right now.
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>> good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. our guest host, st. louis fed president jim bullard. >> thanks for having me. >> first let's take a quick look at the futures. yesterday, the s&p pushed through the highs that it closed last year. 1854 is where it closed yesterday, pushing past 1850 for the first time this year. dow futures down by 5.5 points, s&p futures off by just 1.5. the ten-year note, the yield continues to hover around 2.67%. that is still near a three-week low for the yield on that. and tension remains high in ukraine. especially in the crimea region where armed men have taken control of two airports. ukraine's government is describing it as an invasion and
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occupation by russian forces. u.s. defense secretary hagel warned russia to respect ukraine's sovereignty and avoid provocative action. russia denied involvement in the airport seizures. this situation continues to be ugly and confusing. men's apparel retailer jos. a. banks says it's talking to talk about a higher bid. that's the first time any of these folks said they wanted to talk to each other at all. men's warehouse raising from 57.50 earlier this week and added it would consider increasing that offer to $65 if it was allowed to conduct limited due diligence. hanging in the balance of all of this is eddie bauer which was maybe being played like a fiddle in trying to bring both of these guys back to the table. we always knew they wanted to do
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a deal of some sort. >> this merger makes sense. >> i would argue this makes more sense. >> these two companies should get together. if you're in your car you won't let them drive past the street where either one of these are located, right? you wouldn't wear a men's warehouse sock. there's no way. >> you know what i think i'm going to do next week? i'm going to dress head to toe in men's warehouse and the next day i'm going to do jos. a. banks. then i'm going to mix and match, considering the possibility of a merger. >> who came in here who was wearing a tom ford suit. you knew immediately it was a $4,000 suit. >> rancic came on this with beautiful suit. >> the second estimate of gdp growth in the fourth quarter
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comes out at 8:30. sorry, steve. >> bald jokes. there was no call for that. >> there wasn't. >> i didn't say anything. >> they don't even know you're here. >> they don't even know i'm here and you're making bald jokes. >> gratuitous nastiness. 8:30 eastern, economist think the numbers will be revised down to 2.4. >> we have the perfect person to ask. jim bullard, we also introduced him. this is the question. is this the weather that's impacting the economy or is there something here that things have slowed down? >> well, i think weather is a factor and jerry allen said yesterday as much. it is hard to disentangle, that's for sure. i think that's because, even though we use seasonalized data, it's very hard to get a sense of
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exactly where the weather is hitting. how much is that affecting retail? you think of something like this event in atlanta where it got all iced up, all these problems. you know. if you just use temperature data or something like that and try to take the weather out of the data, you're not going to see all that damage that was done to the economy in atlanta over that 24, 48 or 72-hour period. so i think it is hard to disentangle. i do think that weather has been a factor here. i'll say something else. let's suppose it's not weather. let's suppose we get this evision down to 2.4 this morning. we'll see. and we get kind of a first quarter in the 2% range or something like that. i'm not sure i'd be less optimistic about the rest of the year. i think i'd still be optimistic about 2014 even if all that happened and even if you prove to me that it had nothing to do
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with the weather. i think the outlook would still be pretty good for 2014 and i think i would still project that 2014 would have stronger gdp growth than 2013 did. and i would still project inflation would come back to target and other things i've got. i don't think this spate of soft data, the way i'm thinking about it right now, is going to be enough for me to revise my forecast. we haven't done it yet. i reserve the right to do it. we'll see. >> some of the troubling things that pop up, if you look at some of the numbers, the housing numbers in california, that's where weather wasn't playing into things. how do you explain what's been happening there? >> people have been talking about housing, you know, the prices have changed. they're not as low as they used to be. some of the prices in california are up quite a bit in some parts. but i still think, you know, interest rates are quite low.
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housing overall is still in much better shape than it was. i think, you know, i think we'll still have a good year for the housing sector. it won't be probably as good as last year. but i think it will still be good. >> jim, yesterday, janet yellen was speaking and the market seemed to at least interpret her remarks as saying if things slowed down precipitously from an economic standpoint, and it tornadoes out it's not just weather, the fed could be in a position of slowing down the tapering for us. maybe stopping, maybe even reversing. that seems to be why the market really pushed through to higher levels yesterday than we've seen all year. is that the correct interpretation and is that your understanding? >> only janet speaks for the committee. she said that the committee has protected its right to change the pace of tapering in either direction. it could speed it up. we could slow it down. i'll say this. if you look at what happened last summer, the june meeting we
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surprised markets on the hawkish side. we got a big reaction and the september meeting we surprised markets on the other side. we got a big reaction. that shows you, you've got to be careful. if you're going to make a decision like that, which we can do and we might do if the data pushed us in that direction. you have to be real sure you want to make that kind of a move. i think that's what she was reiterating at the hearing yesterday. >> it sounds like what you're saying, though, if it turns out to be not weather, that it doesn't change your outlook on growth, which would mean you're not really going to change outlook on policy. >> yes. >> for this issue i'm saying, suppose down the line during the spring, you know, it becomes apparent that, okay, jim was wrong. really is the economy is much worse than we thought. the committee has reserved the right to say, we're going to, you know, change pause on the pace of tapering or even go in
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the other direction. >> but what you said earlier -- >> but for right now, assessing the current gdp data and this weather issue, i just wanted to throw this on the table. it's not clear to me that i would become less optimistic about 2014 because we got weaker gdp numbers in the first quarter than the fourth quarter. one thing people have been saying is that there's been an inventory runup during the fall an some of that would have could come back out in the first quarter. >> are you grading the current stated unemployment rate? are you ragrading that on curve do you take that as the number? >> i take that as a signal of strength in the u.s. economy. >> is it really 7.5? >> it's 6.6. >> okay. you're not adjusting it for any of the weird things? >> i gave a speech on labor
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force participation. and i reviewed a lot of the literature, it's called the rise and fall of labor force participation in the usa. i came away thinking, look, this labor force participation is i trend phenomenon. it does not have a big cyclical component. if you look at the postwar era, in the '50s and '60s it was low, 59%. peaked up, because of women coming into the labor force peaked at 67.3% in 2000. it's got this hump shape. it's been coming down. >> you could raise fund rate a week from friday? >> we're at 63% now. what you've got is a big trend. we have demographic models that do a good job of explaining that trend. >> if we get to 6.5 next friday -- >> those guys are not going to come off the sidelines, i don't think. as the economy continues to improve. >> that's a good tactic. >> so what that means is you can
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take the signal from unemployment as a good signal. that means the economy has been getting stronger. i think it will continue to climb and we'll be under 6% by the end of the year. >> you could raise rates. >> we'll see if this all involves the way i'm saying. by the way, st. louis won the unemployment forecasting contest at the fomc. there is actually no contest but if there was, we got it. >> what numbers do -- they actually -- do they really talk about the number or is it -- >> we look at a brad variety of lab economic data. hours worked, long-time unemployment as the chair emphasized in her testimony. all kinds of labor market indicators. >> when ben has talked about 6.5% and 6% or did -- >> he's gone. >> i know he's gone. >> who?
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>> i have to switch back on this. economists see low wages, all these people working part time for economic reasons and they see very little signs of tightness which under your formula suggests we should be, as joe's suggesting -- >> 6.6 is still high. >> what's the right rate? what's the long-term rate do you think? >> the committee puts a central tendency on that. which is in the 5 range. i'm on the high end of that. i'm at 6. >> you're at 6. >> i'll give you my logic on that. median unemployment in the united states over the past five years is 5.8%. i don't think the labor market is as good as a lot of the labor markets that have been around in the u.s. over that 50-year period. damage has been done by the financial crisis. there are other structural problems like the ones you're talking about. i think the natural rate is a bit higher than the median rate over the last 50 years. i put it at 6%.
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we're still above that. if we come down below 6%, that would be sort of overshooting of the natural rate. >> you have to think then that fed policy is close to being overly accommodative. in that you're half a point from your long run rate and -- >> according to what i told you, we're closer on unemployment than we are on inflation. inflation is running low, 1.1% or so. so we're 0.9 away from target on that and 0.6 away from the higher natural rate right now. if you look at the summary of economic projections, most of the members are lower, 5.5, 5.25 on unemployment. i don't believe it. because of the reason i just told you. >> when do you peg the first rate rise? >> well --
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>> next friday. >> i actually have -- as of my december forecast i actually have it still in 2014. >> you do? >> yes. i was one of two, i think. i'm going to have to resit that and see if i want to keep it in 2014. why did i have that? it's because i have a faster pace of unemployment decline than most people on the committee. i have a natural higher rate than most people on the committee. i'm somewhat more optimistic that inflation will come back to target. maybe other people might have a slower trajectory -- >> does everybody that walks in have a model like you do? >> sure. >> everybody sits there and debates the actual models themselves? >> that would be an overstatement. we have the transcripts. you can see what gets said. one thing is, we have our own staff. we push the staff pretty hard to
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tell us what to say and what to think. i think that's a great part of the fed. you get independent views across the system. >> i think this is pretty important. you were one of two people looking for interest rates to potentially rise in 2014. >> as of december. >> as of december. >> right now you think you probably need to revisit that based on the economy. >> when we were talking about it in december. >> should we put it in the first quarter of 2015 or 2014? now when we review that in march -- >> the journal wrote a piece about two people. were you one of the two. >> yes, i was one of the two. >> i would have never thought it. >> i have to look this up. >> the summary of economic projections it gives that 2014, 2015, 2016. the quarter of 2014 is not that different than the first quarter of 2015. >> you said it wasn't real and
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you didn't mean it anyway. that piece was stupid. >> which piece? >> the piece about how they're going to raise -- two people say we're going to raise near term -- >> the market throws it out. >> you threw me out. >> st. louis got the unemployment forecast right in 2013. >> you lost to the red sox in four games or something. >> six games. >> you're hanging your hat on -- what did you win in st. louis? >> contest. >> imaginary contest. >> instead of the world series, you're hanging your hat on this? >> the world series is past. >> i heard him say, st. louis? st. louis won what? they have a good basketball team, st. louis. >> basketball? >> yes. >> all right. you'll be with us for the rest of the program. >> if you say. we have a lot to talk about. coming up, what is am going to tell shareholders today? we have a preview of today's big
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meeting. and later, exclusive interview with billionaire and investor sam zell. check out the futures this morning. red arrows seem to be the case. back in a moment. let's say you pay your guy around 2 percent to manage your money. that's not much, you think except it's 2 percent every year. go to e*trade and find out how much our advice and guidance costs. spoiler alert. it's low. it's guidance on your terms not ours. e*trade. less for us, more for you.
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legendary investor warren buffett will be joining us live
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for three hours. tweet us using the #askwarren. two have been brought in to take over some of the investing for berkshire's portfolio. by the way, joe, that was ted that came up with devita. >> the three of them sitting down together, a rare appearance. >> i don't think he's talked ever. >> the three of them have never been on tv together. they haven't wanted to talk. there's been curiosity around them. by the way, tweet questions for those threes as well. all of this starts monday at 6:00 a.m. eastern time. >> you get to go to nebraska for this. >> i do. >> your job is -- >> i'm a little worried about the weather. i'm looking at the snow on the way out and on the way back. >> monday. it is. >> snow sunday getting out there, snow monday getting back. >> this weird weather, i'm
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telling you. coming up next, today is apple's big meeting with shareholders. there he is, tim cook. we'll tell you what investors want to hear from investor tim cook. could the iphone 6 be coming sooner than first thought? that could be interesting. so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates. lemme just get this out of here. to go. unlike some places, we don't just change your oil. our oil offer comes with a four-tire rotation and a 27-point inspection. and everything looked great. actually, could you leave those in? sure. want me to run him through the car wash for you, too? no, no, i can't. get a dexos 1, synthetic-blend oil change, tire rotation,
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♪ should i stay or should i go ♪ if you say that you are mine ♪ i'll be here till the ended of time ♪ tgif, everybody. the latest edition of the talking squawk blog is now officially out and ready for your eyes to see. squawk.cnbc.com. see it there. ukraine's presidential palace, we have pictures. you can also read about kevin o'leary's view about investing in marijuana and stock picks from billionaire ron barron. >> apple kicks off its annual shareholder meeting at noon eastern time. what are investors looking for? is it forte managing investor? the word to have a skill is actually forte. >> you have a forte. >> you have a forte.
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forte is a musical thing. >> there's going to be an iphone 6 announcement, tom? >> well, i don't anticipate a new product announcement to that extent but i do anticipate tim cook will reiterate his prior comments that calendar 2014 will be a year of new products which we extrapolate to mean a watch and a television. >> a watch and a television. i saw a watch that i would i think use, not the samsung but it would do all different stuff. it wasn't bad looking. i saw it. you think there will be an apple watch this year, tom? >> i do. >> is that the one to wait for? >> if you look at the market right now, no one's exactly killing it. i do think that's created an toon for apple to come in with a unique product and differentiate and take advantage. >> will it be stylish?
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will they partner up with a regular watchmaker that can charge a lot. >> if they partner up, i would say it's more likely on an accessory front. find a way to accessorize your iwatch. >> you think the bigger opportunity is tv, i'm assuming or the watch itself? >> the tv is definitely a bigger opportunity. especially 23 you look at a price point. the watch right now in the market you're seeing around $199. apple came in at 299 or 249. you're looking for an opportunity to win the living room. that battle is still wide open. >> all right. they should make watches, tvs and teslas. >> what do you think about tesla? >> tesla is fantastic but it's hard to imagine a company that has historically hasn't made an acquisition greater than $1 billion would pay what it would take to acquire tesla.
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>> the merrill lynch guy yesterday reiterated his $85 price target. that's good, isn't it? >> we'll see what happens. >> yes, but -- he's been a little off. >> he's been out there. coming up after the break, former ceo of. lord john brown will join us to talk about the future of energy when we return in just a moment. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
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welcome back to "squawk box," everybody. i'm becky quick. we have your morning headlines today. mt. gox filed for bankruptcy protection. that announcement came at a tokyo news conference at which mt. gox ceo apologized for the bitcoin exchange's problems. he said mt. gox may have lost nearly $500 million because of bitcoins because of a hacking into their system. wow. >> you pulled a sorkin. >> i know. i saw you catch me. >> is that what it's going to be called, a sorkin. >> skip the name. >> skip the name. say ceo. what difference does it make? why are we hurting ourselves? >> right. nobody out there knows who he is.
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>> investors have been unable to withdraw bitcoins for several weeks from mt. gox. they handled more than 80% of trades in the virtual currency. that's why you've seen such a huge amount of concern and have seen bitcoin's valuation drop substantially. u.s. automakers are extending their discount lure through march. ford is offering $8,000 and more on the f-150 while the chevy silverado is discounteded at about $9,000. and jos. a. banks called the men's warehouse takeover offer inadequate. men's warehouse raised its cash tender offer to jos. a. banks shareholders to 63.50 from $57.50. it added it could increase the offer to $65 if it was allowed to conduct limited due diligence. jos. a. banks said on thursday
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it was prepared to provide men's warehouse with a limited amount of due diligence information under certain conditions. let's get back it our guest host st. louis fed president jim bullard. you watched once in a while. it would be too much to ask that you would have seen jim grant. you've seen some of his mewesings in the past. he's a purist. but he's smart and he's a purist. he makes the point that we still aren't out of the woods in terms of the fed extricating itself from all the action, because whenever you basically set prices artificially, wages or prices, there's going to be dislocation somewhere and unbenounbe nons -- unbeknownst to you. europe got so ineffective at managing their own economy that there's no inflation. the rest of the world allowed you to do all this. >> i think that's a good theory
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about what happened. we went into qe 3. i was expecting inflation, inflation expectations to go up. it didn't really happen. i think it was partly because europe went into recession. >> it was very -- >> i'm not going to use fortuitous. >> it was serendipitous that it coincided and happened at that time. right? look at the ten-year. you are tapering and it's below where it was. >> i think that's fair. you were intimating that we were pulling back. >> you are pulling back. depends on the date. >> we're still buying a lot of bonds. you have the promise about low interest rates in the future. it's no the that we stopped buying the bonds. we've only tapered. >> your promise is about when you're raising rates depends on the dates either. you just admitted. >> it depends on the economy. >> yes. >> it depends on the economy and the outlook for the economy fluctuates.
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>> if we were -- if it's not weather and there is something worse going on or something happening, it's always hard to find cause and effect. but i can't think of anything in the world other than china that would have us worry. we should be happy right now. europe's better. we have a budget. there's no wrangling, it's quieted down. what would cause us to slow down. >> all the things that we've been worried about and complaining about over the last couple of years have dissipated. you have household deleveraging that's more or less run its course. you have wealth in the u.s. because equities are up, you know, 30%, much closer to normal. >> thank you for that, too. >> housing values are coming back closer to normal. they're not up at those peak values they were in 2007. you have gdp growing in the second half of last year, 3.5%.
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we'll see what the revision says today. but right now, it's 3.5% for the second half of last year. i mean, these things look good. we worried about fiscal brinkmannship. >> yes. >> that seems to be on a truce for at least this year. and europe, we've been worried about europe being in recession. europe is out of recession, spain growing some, one of the worst cases in europe. so i think you've got a lot of things you can point to that look good. i think the deck has been cle cleared for u.s. growth. even if the gdp comes in weaker or the first quarter gdp comes in weaker, i'd stay optimistic for 2014. >> the other thing is, like the bond market, a lot of money, big money, terminal pricing, if you had -- if it was that artificial where the ten-year was because of all the qe or because of where you put interest rates, you would figure -- it seems to be at 2.6 on its own.
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it doesn't seem like what you did had that big an effect on where it would normally be, does it? >> well, like i was saying earlier, i think those events from last sum der semer did see show certainly the markets care about qe. it does seem to affect rates a lot. >> when we had the taper tantrum last summer, that was worth, you know, 100 basis points on the ten-year. that's a big move. so i think it is important. let me get back to jim grant who i love. talking about the artificiality of pricing and stuff. i want to push back against that a little bit. you know, anytime you have some kind of policy, the government lays down a policy. here's the policy. the policy is interacting with markets. guys in the markets are finding the prices, knowing what the policy is. even if you had a gold standard or some other way to do monetary
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poli policy, that policy would inform how you go find your prices and get the right prices given that policy. it's all interrelated. you can't ever get away from that unless you'll have no government at all, which is probably too much even for jim grant. so i think you always have to think, what are the tax arrangements, what are the future taxes? what does that look like? what is the monetary arrangement? what does that look like? once i know what that apology is, i can go, jim cramer and others can go and say here's what the prices are. >> that's interesting. >> i know it's been talk around wall street that this is artificial pricing and stuff. it's inhaernt becauerent. >> as free as the market ever gets, still takes into account some -- >> you can have crappy policies and you can have good policies. that's certainly true and fair to argue. you're never going to get away
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from the idea that the policies are affecting the prices. >> more from fed president, st. louis fed president jim bullard still to come. let's take a check on energy prices. oil prices have been climbing over the past month and nat gas has been on a tear this winter. joining us now is lord john brown, former ceo of. bp. welcome to the broadcast, "seven elements that changed the world" is the name of the book. we thank you for being here. >> pleasure. >> lord brown, the question i have more than any, we talk about climate change, we debate climate change on this set. i know that you had -- i don't know if it was an epiphany or transformation at some point during your career when you were at bp, what was it after 25 years of being at bp that made you switch gears but not really? >> it happened about 20 years ago, i guess. it was all about the information
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and the projections for the future. looked like there was a risk, a risk that we needed to take care of and the question was could we do it economically, practically and sensibly? and to my mind, the answer was yes, you could start doing it and carry on step by step. >> you have been a proponent of frac'ing. you say you want to do it responsibly. can it be done responsibly in your mind given your concerns about climate? >> absolutely. and actually that's the point about energy mix. we've got to get it lighter in carbon. we don't have to get rid of all carbon. we have to get it lighter. >> lord brown, do you mean carbon or carbon dioxide? if you mean carbon dioxide, carbon is an element. it's black and it's sooty. are you talking about the gas carbon dioxide or carbon, just so i know? >> mostly about carbon dioxide.
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>> thank you. you're not talking about an elemental carbon. then why not call it carbon dioxide? >> you can indeed. it's just shorthand, if you would. it seems to me that we've got to get carbon dioxide emissions down and we can do it by changing the mix of energies. after all, gas is lighter than oil than it lighter than coal. and gas is very good in the energy mix. i'm a great proponent of frac'ing because i believe it can be done safely under the right regulations and policy. >> here's a question for you. i'm not a sicientisscientist. i don't know enough except what i read. do you have any skepticism that climate change is real? >> what i have is, we'll never know for sure until it's too late. we're dealing with probabilities. they're very difficult things to explain to everybody. my view is, take insurance out and try and push the
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technologies that we use to create energy, renewables, for example, to get them low cost, get them yubiquitous and get th energy mix changing at the time. i think that's very important. >> lord brown, the only problem is you'll have certain people take it to maybe a little bit too far. one of the reasons that the opponents of keystone bring up is that all that up in canada that we're going to bring down, that should stay in the ground. it's hydrocarbons. we should leave it there. because if we develop it, what's in the ground now will end up as co2 in the atmosphere. you have total groups of people that don't want to build any hydrocarbon infrastructure whatsoever, even if it's, as you say, light co2. if you go logically all the way we don't want any co2 going up there. we only added one particle of co2 for 10,000 parts of the
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atmosphere. that's been the total addition we've had. >> as a practical matter we are going to generate carbon diox e dioxide. the question is how much carbon dioxide do we generate for every unit of activity we undertake. >> true. >> we need to leave some -- exactly. it's better to produce gas, better to produce oil than it is to burn coal. that's a fact. getting that in people's heads, i think is very important indeed. >> where do you stand on a carbon tax? >> i think, again, we don't understand where our carbon cap should be. if it were a carbon cap for everybody, then it would be a very good thing. we need, i think, to have a balance so there's an incentive which is implied to everybody for carbon reduction. if it's carbon cap for one and not another, it's not going to do much for us. >> if we were to take out the
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insurance and even though there's some -- the 17-year pause has even climatologists scratching their head and they're trying to explain it in different ways because co2 emissions have increased. let's say we cut off developing economies, our even our growth here in the u.s. is slower than we'd like it to be. we have a jobs problem. we have a jobless problem globally. what if it's chasing a phantom? i understand what you're saying, it would already be too late. to take real action that will hurt developer economies, actually hurt people, based on this. >> you're absolutely right. it means we need to invest in technologies that produce us energy at the right price and also reduce carbon dioxide. that is something which is happening, for example, around the world total renewable
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energy, electricity from renewables now exceeds that coming out of nuclear. and that hasn't happened by accident. it's happened by technologies improving over time. there are plenty of things we can do. >> everybody wants clean air and clean water and china has a terrible pollution problem but to conflate it with an extra 100 parts per million of co2, rather than the real issue in china is particulate pollution. it's a horrible, disgusting pollution. we've gone from 0.3 atmosphere to 0.4 and every single adverse weather event is attributed to this. there's no scientist that would agree with that. yet you see what's done. >> i agree. china has a very big low-level pollution problem. it needs to sort out traffic patterns. it's the way it generates electricity, burning coal close to cities is not a good idea.
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so all of those things need to be sorted out. it's both got a carbon dioxide and a carbon and particulate problem that's very big. >> lord brown, the book, "seven elements that change the world." thank you for joining us this morning. >> thank you very much. >> up next, we'll bring you the latest on ukraine and talk to one man who has been investing millions of dollars in the country for the past 20 years. [ tires screech ]
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welcome back, everybody. investing in ukraine was risky before the recent unrest. ukraine is considered a frontier market.
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michael, thanks for being here today. >> my pleasure. thank you. what do you do now, double down, pull your money out, sit and wait? >> watch very closely. it's very tense. it's exciting. things that happened over the last three months, which is independence and people fight for freedom has been going on today as day 99. it's almost 100 days. but over the last two weeks, i think they have a significant success achieved. the country now is on the track to a much better future than the cabinet ministers was appointed yesterday. the new prime minister is a very promising man. i like him a lot. i know him. he is very well qualified. he used to be the head of the central bank of ukraine, he's an
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economist, as well as a lawyer by training. he was the speaker of the house. he was the foreign minister. he's got a resume that is very, very impressive. and i think he's going to take the country in the right direction. it's european integration, signing the free trade agreement, more importantly. which is ukraine badly needs. the ukrainian economy is in shambles. they need help from the west. in a week to six months they held from the west, this help will be a tug of war for ukraine. >> if it comes through the imf, it will come with big tags athat many along with it. they'll have to put more pressure on their citizens and probably hurt the economy in the short term to reach the longer term prosperity. what happens to the markets and
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investments in the meantime? >> you are exactly right. there are some unpopular moves the new prime minister has announced he'll be making. yes, of course, there is significant conditionality. i do believe ukraine badly needs that. they need this economic reform. we've been investing in the country for a long time. we have a significant amount of investment on the ground. we are excited about the prospects of ukrainian agricultural. the global food security crisis is a big issue for the next several decades. ukraine is a possible solution, significant contributor to that. ukraine has 30 million hectares of land. they're in frac'ing. there are so many areas where ukraine could do extremely well but they need financial support to get some macro economical situations in order.
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after that, investments in ukraine are still very promising. i'm optimistic, even after 20 years of fairly tough investment environment in ukraine. we've done pretty well. certainly the opportunity is much greater. >> you say you have a few hundred million dollars in ukraine right now. >> correct. >> where are those investments. >> in agriculture and we also invest in the cable sector, the largest cable company in ukraine. we invested in retail pharma. we invested in chocolate production. we invested in software development. there are a number of areas in ukraine that are quite interesting you need to keep in mind ukraine is expert oriented country. it's very open economy. experts are 50% of ukrainian gdp. agriculture certainly is the third largest exporter of agricultural products in the world.
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it has the potential to become the largest exporter of wheat in the world over the next decade or so. that's an opportunity, to realize that and gain significant returns. when we come back, more from our guest host, st. louis federal reserve bank president and ceo jim bullard. in the next hour, an interview with sam zell. he'll be joining us at the top of the hour. "squawk box" will be right back.
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checking the futures right now. we do have red arrows, the dow looking like it would open slightly down. the nasdaq would open about a 1.5 points off. we'll be watching shares of pier 1 importers. ceo alex smith says the situation is frustrating, disappointing but expects to return to more typical results
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when the weather improves. we also have a quick alert, alert, alert, alert. the latest edition of the talking squawk blog is out, go to squawk.cnbc.com and see inside ukraine's presidential palace and a lot more. coming up next, an exclusive 30-minute interview with sam zell, chairman. we'll cover it all right after the break. e craft oriented. e craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out. the technology is actually creating new jobs. siemens designed and built the right tools and resources to get the job done. i'm spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast? go to ziprecruiter.com and post your job to over 30 of the web's leading job boards with a single click;
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another "squawk box" exclusive. equity group investments chairman sam zell, the grave dancer, joins us for the next half hour. we'll discuss the economy, washington and where he's putting money to work. emerging markets taking the back burner. last month's move and the markets caught investors by surprise. we get you ahead of the emerging market story with templeton's mark mobius. now he's ready to speak publicly for the first time. we'll bring you the latest on this ongoing battle for political and economic power as the final hour of "squawk box" begins right now.
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welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. in studio, st. louis federal reserve president james bullard. a lot to get to this morning, including famed real estate developer sam zell. and the hobbit was called there and back again. that was the subtitle. look who is here. >> she's here. >> five weeks you've been gone. >> in person. >> yes. >> did you have the brown water coming out of the faucets? >> no. we were in an ioc family hotel, international olympic hotel. >> how about in ukraine? >> ukraine we were in a soviet era hotel. it showed but the water was clean and the bed was fine. >> are you beginning to venezuela? what's next? >> we discussed the issue but venezuela, it's tough to get a journalist to venezuela. when i first started going there ten years ago there was no such
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thing as a journalist visa. it's a long way to get to. >> you're an international correspondent. >> i know. i know. i've been away for five weeks. >> more than a month. >> you're great. let's get through some of the headlines this morning. apple's annual shareholder meeting taking place at the company's headquarters. among the proposals on the table, carl icahn's push for the company to increase its share buyback program. apple is asking share holders to vote against all of those measures. it's a busy day for economic numbers on the final day of trading for february. investors take a look at the first revision of the fourth quarter gdp at 8:30 eastern time. they are looking for 2.4%, down from 3.2%. we'll also be getting the university of michigan consumer sentiment numbers at 9:55
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eastern. and we're keeping an eye on shares of deckers outdoor, the maker of the ugg boots and shoes. investors are focusing on the report coming out today. >> you're reminding me of my idol, richard engel. >> i sat next to him in russia at sochi. we were in the same hotel in ukraine. >> wow. really. >> yes. nothing happened. >> i could not guarantee nothing would happen. >> between you and him. you have such a man crush on him. >> he's so dashing. >> you were at that palace? >> yes, i went to the palace. >> you saw -- >> all of it. it was amazing. >> you saw the zoo -- >> i didn't -- okay, i did not see the zoo or the ship in person because the estate is so huge to have walked to it, they don't allow you to drive a car. i had to get back to do the live
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shot. we got up, ran to the palace, shot as much as we could and brought back the video we could. >> you're the only person i know that's been to that place, though. >> it's cool. >> i want to touch you before you leave. >> viktor yanukovych, supposedly he's holding a news conference that will begin. we may see headlines before we see him visually. for some reason they are doing tape delay of ten minutes out of russia. >> what? >> this is video of him last week. viktor yanukovych who believes he's still the rightful president and legal president of ukraine will hold this news conference in russia. we want to hear what he has to say. in the meantime, there are three european states that have frozen assets of him and his family accounts. we have lichtenstein friesen bank accounts at the request of the new government. in crimea, armed men have seized two airports in crimea.
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russia denies involvement. the ukrainian interior ministry says russians are are in control. the u.s. has appealed to russia not to intervene. we have regional parliament that has been taken over by forces. financially speaking, the country has started limiting dollar withdrawals, foreign currency withdrawals to maintain their pile of cash. here's the new cabinet. the new prime minister and the secretary on the left. that's improved the currency because if you don't worry about people sucking every dollar they can out of the system that will stabilize the situation. we are monitoring, waiting to see what yanukovych does and says when 'pears. as soon as he does, we'll bring it to you. >> thank you, michelle. >> thanks, michelle. >> all right. >> touch my finger. >> pull my finger. >> no, please don't. >> that's what richard says. real estate titan sam zell
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backing developer related and hedge fund core of ex-capital in an activist campaign. they want to unseat the board and management of commonwealth, an investment trust that owns more than 300 office buildings in the u.s. if successful, zell will take over as chairman of commonwealth. joining us from sun valley. nice. in an exclusive interview, sam zell, investment groups chairman. i'm trying to figure out where you were and whether you're going to the pioneer tonight, have steak and lobster or something? sun valley, great place, sam. i'm envious. >> yes, for sure. >> what's your plan here and we defer to you on all things real estate, you buy low, sell high. what do you see here that's being mismanaged or that's attractive? >> first of all, this particular situation, the commonwealth situation, is a situation where
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a structural impediment results in shareholders having almost no voice. by virtue of an externally managed structure of which there are very few equity reits. all of the rest of them are self-managed and avoid conflicts that exist when an outside manager manages assets he doesn't own. and as far as our backing is concerned, this started badly a year ago. they felt strongly that this was both an undervalued situation and a situation where shareholders were being deprived of their right to vote and be represented. they came to me and said our interests are economic. we want to build out of this a great new company. are you interested? i said, if you are successful, we would be prepared to take
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over the company and set up management operation very similar to what we did with the lp. >> so looking back at the last ten years or whatever, sam, you sold -- you didn't know why you were selling. it just seemed like a good time because of what people were offering you. we've had you on since then and things have come back down to where they are attractive again in your view. where are we right now with an improving economy? you're interested in this deal. is there inherent value in real estate everywhere? the stuff that you sold, is it back to where it was when you sold it at this point? >> no. i don't think that the office market is even close to where it was in '07. in this particular situation, i believe that you have roughly a $7 billion collection of assets. that have been misaligned or
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misstrategically run, because effectively, the incentive to the manager was keep buying assets because you get paid on number of assets under your control, not on the performance. all you have to do is look at the chart of eqr, eop and, over the last 15 years, they're in a serious uptrend. commonwealth is dead as a dead man's ekg. something's wrong. >> you sold your commonwealth shares before you agreed to be part of this related slate. >> yes. >> and as part of this you're also going to receive $17 million of in the money options. that's right? >> that's correct. >> so does this not imply that you don't see additional upside in the stock? i mean, why wouldn't you hold your shares or take the stock at market price? >> well, number one, we initially thought it was an
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interesting situation. we thought maybe we could build a position. we quickly found out that the liquidity of the stock in terms of its availability to build a position didn't seem likely at all. and consequently, rather than hold a minor share and have the filing requirements that go with that, we just eliminated the position. it was a very minor position. as far as the in the money options are concerned, the first thing i tell you is that, this stock a year ago was 15. as a result of the work done by corvex and related, the price has gone up to 26 or 27 on the anticipation that they might win. having an option to buy stock the 22 something is hardly a serious economic incentive to me. for taking on this kind of
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responsibility. we're long-term holders. the 17 million is interesting but that's only relevant if we sell. and our history is we're not sellers, we're owners and buildings. >> one other related question to this, no pun intended on the related piece. you sit on about seven boards right no you, two of which are reits. do you have time to actually be on this board? >> number one, i'm not sure that i am on seven boards. i believe i am only on one, two, three, maybe three public companies. i would remind you that the number of companies i'm responsible for today is no different than the number of companies i was responsible for when we were running eop. this is -- we have a wonderful and strong alumni deal with eop and opr, many people have contacted us and said we'd like
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to come try and build another company again. >> okay. real quick, the company commonwealth came out with earnings just yesterday or the day before. and did beat estimates. seemed like it was an improving situation. did you think it was an improving situation and how much more would it improve under the other -- i don't want to say ownership but control effectively? >> i think the question is very simple. if you own stock in a public company, you should have a right to vote. you should have a right to change. you should have all of the rights, the fiduciary responsibility to management should be the case. that has not been the case in this situation. almost every anti-takeover, anti-anything you can imagine was put into this company by the external manager to protect his position. >> right. >> all i want is for the
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shareholders to have a clear vote as to the future of their capital. it's their capital. it's not the manager's capital. >> i don't disagree with that. we'll get on some other subjects after we take a quick break. so stick with us and we'll be right back. of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. so our business can be on at&t's network for $175 a month? yup. all 5 of you for $175. our clients need a lot of attention. there's unlimited talk and text. we're working deals all day. you get 10 gigabytes of data to share. what about expansion potential? add a line, anytime, for $15 a month. low dues, great terms. let's close!
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let's get back to our special guest. we are joined once again from sun valley in an exclusive interview by sam zell. he is equity group investments chairman. our guest host is st. louis fed president jim bullard. sam, we've been talking an awful lot about the economy this morning trying to get president bullard's thoughts on this. where do you see the economy right now? >> benign. i don't see any animal aspirations. i think we have accepted a level of growth that over the long term is a real problem. and i think we have to refocus our efforts on growth. i don't know whether fed member bullard agrees with me, but i find it very difficult to believe that you can have wealth
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redistribution and growth at the same time. and i think that our taking the eye off the ball on growth is being reflected in the performance of the country. >> president bullard? >> i'd certainly like to see better growth in the u.s. economy. it has been weak since the financial crisis. a lot of people have attributed that to the reinhart-rogoth hypothesis that countries grow slower after a financial crisis. emphasizing growth, absolutely. and what kinds of policies would do that, you need more innovation, technology. that technology has to defuse through the whole economy. you need better capital. i'm for all of those things but monetary policy doesn't directly affect those things. >> sam? >> i'm not sure i agree that
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monetary policy doesn't affect those things. i think if you took all of the issues you just mentioned, and they all kind of wrap together in levels of uncertainty. to the extent we create levels of untenty within our society, people are less willing to take risk. that's really what growth is all about. >> no. absolutely true. if i'm not mistaken, ben bernanke's dissertation was uncertainty in investment and he was investigating exactly that. i'm a big advocate that we need to have stable policies that keep uncertainty to a minimum. above all, tax policy has to be stable and smooth so you can plan into the future but also government spending policies and also monetary policy. that's why we talk in terms of monetary policy rules. it has not been as good a time for stable monetary policy in
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the last five years as i would like it to be. hopefully we can get back to something more ordinary, more predictable in the next five years compared to where we've been after the financial crisis. we just had to come in with so many improvizations in the last five years, especially around the time of the financial crisis. that has upset the equilibrium in the u.s. economy. >> sam, where do you place the blame for where we stand right now? it seems like you think this is a much longer term structural problem, in the a cyclical problem we're dealing with. >> i think that the current situation, i completely agree with mr. bullard. but you know, in a way, in 2015 saying what happened in 2007 and '08 and '09 is still impacting us is a little bit like blaming
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bush for everybody that happened after he left office. so i guess all i'd say to you is that, consistency, transparency, predictability, that's what the future is all about. that's what makes great countries function. i think the current environment has a massive amount of uncertainties that are making it very difficult for people who have the responsibility to take risk to take that risk and feel confident. >> well, sam, i agree with you completely. i really do think it's important to get to these stable policies. just let me stress, i think everyone that's involved in monetary policy would really, really, really like to get back to a more normal monetary policy like the ones that we enjoyed in this country during the '80s and '90s and parts of the 2000s.
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and those in some way served us very well. if we could get back to that sort of environment, which was a more predictable environment, i do think we'd get better investment and ultimately better growth in the u.s. economy. in that sense, i agree with your hypothesis, that monetary policy can feedback to growth in that sense. >> but at the point you're referring to, the cost of capital was, quote, unquote, above the inflation rate. so we weren't, quote, unquote, subsidizing capital below the inflation rate. that's the part of this scenario i have a great deal of difficulty understanding. because i think it destroys the animal instincts. >> right. >> there's a guy, jim grant who wrote an article about the shot clock in basketball. i think zero interest rates are like not having a shot clock in basketball. >> sam, i wanted to change --
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>> you certainly have investors saying, i've had a lot of ceos saying, wow, they're in no hurry, they have a big investment they're thinking about making. they're saying i don't have to be in any hurry, rates will be low for a long time, i'll wait a year to make the investment. as the economy normalizes we'll get some of the people coming off the sidelines, maybe you included. >> sam, real quickly -- >> well -- >> i just want to change topics. we don'tly have a couple minutes with you left. a couple weeks back you made a couple comments related to tom perkins and the 1%. you were criticized as this seems to be the populous backlash against some of the comments he made and you made in support of him. what do you make of those people and what they were saying? >> you know, all i can tell you is what i said was that the definition of mortal sin is envy.
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creating and perpetuating an environment of class conflict is neither part of american history, nor positive for our country. i think what mr. perkins was saying was that this enormous emphasis on, quote, unquote, the disparity in incomes and the, quote, envy question had elements to it that were very negative. and i couldn't agree more. >> and you know, if you just want to be absolutely honest, sam, with what we need to do for jobs in this country, the single minded focus on the minimum wage by the administration, it's clearly another wedge issue that -- a populous wedge issue that doesn't really scratch the surface of the steps that we need to take to address unemployment and yet it's done for the precise reason that you're talking about right now. so perkins says one thing, well,
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on the other side, they're manipulating the entire argument to their own advantage. it's just a frustrating environment to be in right now. >> what's new about that? that's been going on for six years now. >> five years. >> five and a half years. >> i know. but at this point, would you say in the past where regulation and uncertainty caused you to think that, you know, that the country was going to be stuck in neutral, do you think that at least now with a budget and with congress not wrangling and with europe doing a little better, america finds a way to work through a lot of head winds. are we doing that right now in spite of the efforts of d.c.? >> well, i think the environment is obviously a lot better today than it was a few months ago. or a few years ago for that
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matter. but there's still a great deal of uncertainty out there. look at your headlines this morning. venezuela, syria, ukraine. what does that all mean? how do i make a bet on the future if there's going to be a cold war confrontation? or, you know, a country like venezuela will come apart? i don't know the answers to those questions. but when you look around the world at all of the, quote, unquote, hot spots, it makes -- it generates caution. now, maybe as somebody once said, you know, the united states is the best-looking broad in the brothel, but that doesn't necessarily translate into a vibrant economy. we need to encourage risk. we need to generate certainty. we need to focus our country and the people in this country on making progress for the whole
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country. and not the divisive nature of what has been going on for the last five years. >> broad is a word i haven't heard on cnbc in a while, sam. it took you to -- >> would you like the translation? >> no, no, no, no. we have to go. anyway, thanks. thanks, sam. see you later. >> great to see you. >> my pleasure. i want to correct something we said earlier this morning about 20 minutes ago about apple. apple we said was going to be shareholders would be considering carl icahn's proposal. that's not true. he pulled that proposal weeks ago. we talked about that earlier and mistakenly spoke a few minutes ago. heard from tim cook who's watching at home who pointed out he withdrew that proposal. >> still no christmas card, tim, if you're watching. >> it's in the mail. >> you two got your nice -- >> no that you're bitter. >> bitter party of one.
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up next, update on viktor yanukovych, his news conference taking place in southern russia. then it's gdp and market reaction. we'll be right back. ...return on investment wall isn't a street... isn't the only return i'm looking forward to... for some, every dollar is earned with sweat, sacrifice, courage. which is why usaa is honored to help our members with everything from investing for retirement to saving for college. our commitment to current and former military members and their families is without equal.
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welcome back to "squawk box." we are seconds away from the first revision of gdp. rick santelli standing by.
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we have steve liesman right over here. let's take a quick look at the futures. it's been sort of back and forth all morning. the dow looks like it will open up two points higher. i call all of this virtually unflat. we are five seconds away. rick? the numbers, please. >> five seconds away. our second look at fourth quarter gdp. let's see if there's any sam zell animal spirits here. 2.4. i guess there isn't. >> right on. >> we were originally looking at 3.2. the third quarter settled out at 4.1. 2.4, our second look would be the weakest since first quarter of last year, 1.1. it really does underscore one issue. it's called sustainability. anybody can buy a vowel. it's how long the word goes on that really matters. you look at con summing, 2.6. that's light. you look at the price index, 1.6. that's actually 0.3 heavy. the price index, moving in a way
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that might be counterintuitive to all the disinflation people, especially the ones screaming across europe. if you look at quarter over quarter, pce core, that's 1.3. that's also a couple of tenths hotter. we have more data to come today. interest rates seem to be settling in the mid-260 area, basically the lowest level since early february. the dollar getting its clock cleaned this morning. the euro is up a handle. the pound is up a handle. the yen is doing better. all things considered it's hard for me to buy into the only reason interest rates are down is any kind of european or geopolitical flight to safety. back to you. >> thank you, rick, for that. i'll head over to steve here. >> i'm going to zero in on the one good number which people have been waiting for. interest investment revised up from 3.8 to 7.3. >> that's big. >> that's okay. that's a pretty big number.
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the biggest jump was in quipt, up 10.6%. i'm going to get to jim bullard in just a second. rick is right, inflation was revised higher but it's still pretty low. your core market based index is 1. pce 0.8. the price index overall is 1 from 0.7. it's nice to have a whole number there. it's still pretty low. we'll get jim's take on that in just a second. the other thing which i find incredible, if i can get on my soap box for one time time here. >> please. >> government purchases revised down, 5.6% to the negative side. rick, that's not my issue here. you know we disagree on the issue of -- >> you agree. that's a good thing. >> that's not my issue. why can't the government couldn't the what the government is doing? >> why is there ever a revision? >> why do we get revised government jobs numbers? it's one thing if you tell me state and local.
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if the federal government can't count what the federal government is doing -- they were talking about all this stuff, about using big data for the government data. just get right what you do. call the guy on the phone from the other agency. >> steve -- >> as i understand it, china never revises its gdp. >> that's the other way to do it. i want to get on my soap box on this issue here. let's do one thing right, the government should be able to count the government. it's 20% of the economy. jim, your thoughts on gdp today. does it make you feel worse about the economy revised down friday initial 3.2 to 2.4. >> this still leaves the second half over 3%. >> it does. >> that's, you know, fairly good for this economy, which has not grown at that pace. like i was saying earlier in the day, i'm not sure this would make me any less optimistic about 2014. we've got a good situation ahead of us for this year. there's every reason to think the economy will grow rapidly in
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2014, whether the fourth quarter was 2.3 or 2.4. this is a moderately large revision. that's interesting. the investment number is interesting there. a lot of times a mix of this number is important. i didn't catch the inventory adjustment there. >> i'll get to that in a second. >> and also the inflation number, did i get it? year-over-year core inflation ticked up. >> year-over-year core, core pce was 1.3 versus 1.1. >> you didn't have these numbers? >> come on. >> i'll say something like this. >> business inventory was revised down. >> if core inflation moved up some, that's something that the committee has been predicting and been looking for. that's been bottomed out for about nine months. that has ticked up a little bit. that would be consistent with people that have been saying, well, we think inflation will come back toward target.
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there's a lot to digest here. but that's my off the cuff reaction. >> what about rick's idea, which i like, which is this notion that you can't get sustainability here. you do a good quarter. there's every reason to believe, given how slow the economy is running, that you'd have a couple sustained quarters in a row. you did a nice 4.1, you can only follow it up with a 2.4. >> somebody said about that 4.1, that there was an inventory component to it. i'm not sure how that played out in this revision. we'd like faster growth, obviously, like faster growth, in the late '90s we'd have 4 had the -- 4.1 quarters one right after the other. it's been a long road to recovery in this -- since the financial crisis. >> segue to policy real quickly. we haven't had a chance to talk about one particular issue. 6.5%. that's the threshold for thinking about raising rates. >> yes. >> you're at 6.6.
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>> yes. >> what do you do with that language at the next meeting? >> that's a great question. we knew when we set up these thresholds that at some point we would pass through one of the thresholds and probably the unemployment one. and that's exactly what's happening. now we'll have to revisit the language. i don't know where the chair is going to come down. >> rick wanted to get in and ask some questions. this is the whole discussion. >> i don't know where the chair will come down. it will be discussed and we'll see what she says. we're looking at it. >> you know that's what i was talking about before. >> when i said you'll have to raise rates next friday because we'll be at 6.5. >> my question is what are you going to do -- >> my question was different. >> really? >> it was about changing the language and getting to a new place. >> obviously they're not going to raise rates next friday. if they get to 6.5 -- >> i love we can have this conversation in front of mr. bullard. >> that's what i was saying earlier. >> it's not the same question.
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>> oh, god. >> thank you, steve, for being here. thank you. becky? let's get to michelle caruso-cabrera. she's been monitoring outed ukrainian president viktor yanukovych's press conference. >> he's calm but defiant. at one point, a reporter asks him are you ashamed of anything. he said, yes, i am ashamed. i am ashamed i could not maintain stability in ukraine. no reference to any of the stuff that we have seen over the last several days about the amount of wealth he's amassed or where he lived. when i say he's defiant, he says nationalists and fascists have seized power, power has been taken over by radicals. he want the country to return to the terms of the february 21st agreement. that was the agreement that kept him in power. he says he intends to continue to struggle for the future of ukraine. he says he didn't flee.
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he was forced to leave because of security measures because at one point he was shot at, he says. he says the crisis in ukraine has to do with irresponsible western policy that indulged the protesters, indulge is his word. he says the current parliament is not legitimate. he also just said that he has spoken with vladimir putin by phone since 'riffed in russia and that there is going to be a meeting with him at some date in the future. it hasn't been set. remember, he's in southern russia. in a city two hours east of the ukrainian border in the southern part of russia. he's conducted this news conference entirely in russian as well. he continues to field questions. once again, very calm and yet very defiant. he's also said he has not asked russia for any military intervention on his behalf in ukraine. guys, back to you. >> all right. thanks, michelle. when we return, we go global with mark mobius. "squawk box" will be right back. k about the alternative.
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up next, the greatest party on earth but can the sound of parades make you money? we'll talk brazil and other emerging markets with templeton
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mark mobius here to talk about emerging markets. there you can see -- how far back are we going there? only a couple months. there was weakness. we might even call it a rout in the emerging markets. the index has recovered some ground since the big drop mid-january. brazil was a big piece of that
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puzzle. it's hosting the world cup for soccer, the summer olympics in 2016, brought to you by nbc. could those events pay off in the end? joining us now from rio, squawk master mark mobius from templeton emerging markets group. you're in rio. >> i love brazil. i love the other part of the world as well. >> brazil, that's why you're there. and how should -- how would a normal person play brazil in why would a normal person want to go into brazil and what parts of the economy are most attractive? >> well, first of all, brazil is the largest country in latin america. it's one of the largest countries in the world in terms of population area, in terms of exports, imports, et cetera. you've got to be here. of course you've got to pick where you want to be. of course now with the world cup
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and the olympics coming along, you want to be in consumer oriented stocks. so the obvious candidates would be companies like ambev, the largest beer producer of soft drinks here in brazil. there are other companies here that are very attractionist for the consumer. so i would say now with the correction we've seen, it's a good time to be in brazil. >> and connect it up, why the consumer? i would figure they have to build a lot of stuff, too, down there for the olympics, don't they? >> yes. but the unemployment rate is very low here. we're looking at unemployment 5% or 6%. of course there's a lot of unhappiness about inflation, but at the same time, there's more and more money in the hands of consumers. then of course with the influx of visitors coming into the world cup and the olympics, that will also boost consumption. they'll be a lot of holidays and that, of course, tends to
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increase consumption. >> i don't think -- i don't think we got to talk enough about china last time you were on. i think there was more for you to say. when you talk about china, you're almost talking about that entire area of the world because so many other emerging markets are dependent on china. can you give us a future blueprint of what you expect to happen and whether it will be positive or negative for emerging markets? >> well, i think we'll see a lot of bad news coming out of china in terms of companies. some companies going bankrupt, some being merged. the whole trend in china is towards a more market-oriented economy. that means that you'll see failures along the way. the government is very intent on merging and acquisitions in the state-controlled area. of course, there are some companies that just won't make it. i'm not talking about state companies but private companies. but on the other side, we want
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to be in these private companies because that's where the profits are. the growth in earnings in these nonstate companies is much greater than the state area. >> okay. the overall economy in china is -- i mean, it's steady as she goes? you don't see any major disruptions to the growth story that is a secular one? >> no. i don't see any major problems. they are still going to achieve 7%, maybe if we're pessimistic 6%. but 6%, an economy of that size, second largest economy in the world is tremendous. in dollar terms, it's much greater than the growth they had when they were doing double digit growth rates. >> because of the size now. mark, we have breaking news on citigroup. we're going to try and have you on again as soon as possible. we'll assume that that's positive, the china stuff, for other emerging markets. have fun.
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don't party too hard. i know what you're like. take it easy. >> thank you. citigroup is adjusting lower its results for fourth quarter and full-year 2013 financial results that it reported back on january 16th, lowering them by an estimated $235 million after tax, $360 million pre-tax as a result of fraud they found in a subsidiary in mexico. let's go to michelle on this. >> it's bantamax at some point they extended 585 million worth of short-term credits to a mexican oil services company. and then they have since discovered that the mexican oil company isn't giving them any more contracts. they've been working with pemex, the mexican oil company. and figuring out what's been happening here. they have receivables outstanding to this company that apparently looks like they may not get paid, hence why they are bringing down the earnings.
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a re-adjustment of the earnings stated, 235 million. going from 13.9 billion in net income to 13.7 billion in net income for you believe that frd is exclusive to this one account, and michael korbat the ceo says that they have been responding with law enforcement to diskcovery of the misappropriated funds. >> i am going through the math, but i don't think it is a penny a share. >> it is not huge for sure. >> but it is a $150 billion company and 3 billion shares outstanding. >> well, it may ask a broader question which is can mexico get the act together on certain things reference walmart and other controlled companies. >> and he is clearly upset about it, because he said, and this is
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corbat, there is going to be punishment for these who had this despicable crime, and oo either through the circumvention of the code or the misconduct, and it is going to be a punishment that sends a crystal clear action. >> and he said that about $3 billion in? this is -- imagine a whale. this is a plankton. >> and the receivables, and that is horrendous. >> and jpmorgan has $300 billion for the regulatory. >> but it is always good to be fraud. >> and becky, thank you for the news. >> also as we go to the break, men's warehouse has sent its own letter to joseph a. bank's
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invitation to conduct due diligence, and we will get to that and citigroup and a lot more when we return. are you stumped by to the today's markets and you want to hear from a billionaire before you put your money to work? well, here's your chance. monday is "ask warren" day. and send your questions to askwarren@cnbc.com. or tweet to #askwarren and we will give you three hours of squawk box with the oracle of omaha. don't miss it. 0
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to the new york stock exchange with the freshest news, jim, from citigroup, and it is a kun are tri down -- country dow there in south america and there is fraud and do we blame the internal controls at citi or who do we we blame? >> well, they have historically been a troubled company there, and when i looked at the news, i knew that something was wrong because the banks had frozen the credit line, and this is a company because it sounds substantial, because it is involved in the oil industry with pamex and it is not the historical record of credit, and
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they should have known better. >> are you surprised that corbat has come out as strongly as he has and is this following the jamie dimon and the whale? >> well, it is relevant, and when i used to meet with citigroup, we met and talked about the idea that they should do the annual meeting in mexico city, because it is a huge part of the emerging market, and this is a terrible story, a and maybe they should have known in 2008 that the company went belly up, and these are 12% loans and it is not loan shark, because mexico has a different loan system, but you should have known better corbat. >> well, maybe puerto vallarta. >> well, it is a big company. >> and thank you, jim. we will see you soon. and coming up soon, more from st. louis ceo of the
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isn't the only return i'm looking forward to... for some, every dollar is earned with sweat, sacrifice, courage. which is why usaa is honored to help our members with everything from investing for retirement to saving for college. our commitment to current and former military members and their families is without equal. back to our guest host kansas city fed chairman fred bullard. and now after the transcripts of the 2008 meetings came out, was it fair? >> well, no, i don't believe it
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was. you have to read the minutes and it is longer than tolstoy, but the crisis had been going on for a year and the fed had eased earlier in the year, and those two things in particular. >> thank you, jim. that does it for us and it is time for "squawk on the street." good friday morning and welcome to "squawk on the street. " ""i'm david quintanilla with jim jameser and david faber. and s&p 500 has cracked the all-time high, and the revised gdp came in lower on the science of creeping inflation, and more signs on the way, and in europe, the standoff in crimea is intens